SITUATION 1: A construction company bought a transit mixer 10 years ago for P90,000 with an expected life for 20 years. The new management anticipated now that the machine will serve well for another 6 years only and purchase a new transit mixer at P120,000 with an expected life of 16 years. The old transit mixer can be sold now at P60,000. Operating cost of the old transit mixer is P1000 and the new one is only P500. Salvage value is 10% of initial value for both engines regardless of length of time they are used. Money is worth 10 % to the company.

a) Which of the following gives the annual cost of using the old transit mixer? A. P13,998.80 B. P13,898.80 C. P13,798.80 D. P13,698.80

b) Which of the following gives the annual cost of using the new transit mixer? A. P15,404.91 B. P15,504.91 C. P15,604.91 D. P15,704.91

c) Which of the following would be favorable to the company, to use the old transit mixer or buy a new one? A. new one B. old one C. no one D. both